Insurers need to realign products, distribution

Written by Kamalji Sahay | Updated: Nov 15 2013, 16:32pm hrs
InsuranceOpening of the insurance sector led to large scale employment generation.
There are 24 life insurance companies in India and except a few, most companies are joint ventures with leading global insurers. It was expected that the foreign partners would bring their rich experience in managing the business and would encash the brand of the local entrepreneurs to rapidly grow in a relatively uncovered market with very high growth potential.

As expected the opening of the sector led to large scale employment generation. But after 13 years the scenario has drastically changed as the number of advisors is declining and the number of employees has also come down substantially. It would be interesting to examine the probable causes of this crisis and to explore the possible way out.

The brightest of all who joined the industry were appointed in leadership positions and they took upon themselves the task of launching a new era in life insurance. But since 2011 their role has become far more demanding and challenging because of the economic slowdown and major regulatory interventions.

Accountability seems to have been invoked selectively or the stakeholders have been consciously liberal for some reason known to them. As a result many of the industry leaders had the luxury of presiding over the companies in the best of the time and in the worst of the time.

The top executives were expected by both Indian and foreign promoters to set up business with long term perspective with due emphasis on establishing infrastructure and organising a well trained team to rapidly gain from the opportunity available. They were also expected to put in place innovative solutions for the discerning customers. In fact, the industry watchers expected them to fully transform the Indian insurance market.

Naturally, most of the CEOs of the initial phase devoted their time and energy on formulating strategy and providing vision to their companies. The strategies were focussed on leveraging technology to the fullest to give the customers an absolutely new experience and to take away from Life Insurance Corporation (LIC) the creamy layer of the market. It was believed at that time that the public sector had deprived the market of innovative products and quality service.

This led CEOs to spend more on branding and differentiating strategies. Most of them continued to pursue such strategies satisfying themselves regarding their expected role play. But when the regulator jolted them out of their make believe world, they came face to face with the ground realities. They then started thinking in terms of benefit to customers and value creation for the investors.

The transition, however, did not prove easy and a few of them moved out. But inspite of sudden awareness regarding the deficiencies that they had built into the system, so far quite a good number of them have held on to their position and are struggling to manage the crisis of negative growth. This is so inspite of the direct interventions of the finance minister and a seemingly more understanding regulator in place for last eight months. This indicates that the leadership style has either led to a weak foundation or it has not been able to match the unique challenges of this business. The business of life insurance is the business of trust, long term relationship and of robust yet responsible salesmanship.

When the economic trends were highly favourable it was convenient to chase topline with unit-linked insurance plans and to believe that everything was on right track. The fundamentals of the business were overlooked or not understood by the new captains. It is the crisis that brings out the best in the leadership but unfortunately that does not seem to be happening. Now it is high time to identify the weak spots or the weak link and the stakeholders must act to establish the culture of accountability.

The crisis should motivate leaders to realign the products and distribution network to create market not hitherto cultivated.

The writer is advisor (Life) GIC Re and former MD & CEO Star Union Dai-ichi